Options Public Charter School complaint

Charter school officials diverted millions, lawsuit alleges

IN THE SUPERIOR COURT FOR THE DISTRICT OF COL




CIVIL DIVISION
OCT 0 1 2013
Sup>> 0
I t;-stulnbia
DISTRICT OF COLUMBIA, Washingon. D.C.
a municipal corporation, . .
441 Fourth Street, N.W. Civil Action No.

Washington, D.C. 20001,

13-0006645

Plaintiff,
v.
COMPLAINT FOR INJUNCTIVE
OPTIONS PUBLIC CHARTER SCHOOL AND OTHER EQUITABLE RELIEF,
a District of Columbia nonprofit corporation, INCLUDING A RECEIVERSHIP,
1375 Street, N.E. PURSUANT TO NONPROFIT
Washington, D.C. 20002, CORPORATION ACT
EXCEPTIONAL EDUCATION
MANAGEMENT CORPORATION
a Delaware corporation,

6.01 13"' Street, N.W.
Washington, D.C. 20005,

EXCEPTIONAL EDUCATIONAL
SERVICES AT OPTIONS PUBLIC
CHARTER SCHOOL, INC.

a Delaware corporation,

601 13"' Street, N.W.

Washington, D.C. 20005,

DR. DAVID CRANFORD
601 13"' Street, N.W.
Washington, D.C. 20005,

PAUL S. DALTON
601 13"' Street, N.W.
Washington, D.C. 20005,

Dr. ..C. HAYWARD
2208' Parallel Lane
Silver Spring, MD 20904,

on DONNA D. MONTGOMERY,
601 13"' Street, N.W.
Washington, no. 20005,

JEREMY L. WILLIAMS
601 13"' Street, N.W.
Washington, DC. 20005

Defendants.

Plaintifi; the District of Columbia (the "District"), by its Attorney General, brings this
action pursuant to the Attorney General's authority under Code to obtain
a receivership and other equitable relief for a nonprofit public charter school whose management
has caused it to abuse its lawful authority and to continue to act contrary to its nonprofit

purposes, to the detriment of its students, in order to benefit and enrich former executives of the

"school,--inc1uding by generating revenue for two for-profit corporations formed and controlled by

its recently-departed executives while they were still employed by the school. In support hereof,
the District alleges as follows:

1. Options Public Charter School ("Options PC is a corporation organized
exclusively for nonprofit purposes, including "to establish, develop and operate a model Public
Charter School for at-risk youth in Washington, During 2012-2013, the individual
Defendants in this lawsuit, as officers, directors, or managers of Options PCS, operated the
corporation, not for the purpose of maximizing benefits for at-risk youth, but for the purpose of
maximizing income, revenue, and profits for at least three of its executives and the two for-profit
corporations they control: Defendant Exceptional Education. Management Corporation
and Defendant Exceptional Education Service, Inc. at Options Public Charter School,

Inc.

2. The public charter school operated by Options PCS serves many students with
disabilities. Most of Options PCS's revenue is per-pupil District public school funding based on
these students' disability levels. Generally, a. school determines the disabilitylevels of its own
students. December 2012, due primarily to a dramatic projected increase in the proportion of
its students whose disability levels would generate much higher-than-average per-pupil revenue,
Options PCS projected that its revenue from the District public school funding would grow from
$11.1 million in the 2011-2012 school year to $13.9 million in the 2012-2013 school year, an
increase of $2.8 million.

3. About two months later, in February 2013, Options PCS contracted to pay the
same amount as the projected increase in District public school fimding $2.8 million for-
management services to be provided by EEMC, a for-profit company controlled and run by the
individuals who were serving simultaneously as Options PCS's president and/or CEO
(Defendant Dr. Donna D. Montgomery, who created EEMC), (ii) clinical director and/or chief
operating officer (Defendant Dr. David Cranford), and general counsel and/or provost
(Defendant Paul S. Dalton). By July 2013, these three executives had resigned fi'om Options
PCS and were serving as the management team of EEMC and EES.

4. The $2.8 million management services contract was the culmination of a pattern
of se1f--dealing by Options PCS executives, substantially assisted by the chair of Options PCS's
board, including a series of large, unjustifiable payments by Options PCS that improperly
enriched at least three of its executives and the for-profit corporations they control. Among other
things, Options PCS made a $159,000 loan to (ii) paid about $449,000 to EES for
Medicaid billing services being provided by Options PCS's own employees; paid EES a

total of $981,250 for student transportation services during the 2012-2013 school year, more than

ten times what' Options PCS paid directly to EES's subcontractor for transportation services the
year before; (iv) paid at least$242,8l6 towards the start-up costs of paid exorbitant
and unscheduled bonuses to three of Options PCS's managers shortly before they left Options .
PCS to become managers of and (vi) granted a management services contract to EEMC
on a sole source basis and, prior to receiving any documentation of the services that EEMC I
purportedly provided to Options PCS, paid EEMC a total of $1.45 million. In sum, since 2012,
Options whose projected total revenue for the 2012-2013 school year was $13.5 million,
about 90% of which is frmded by the District has made more than $3 million in improper

payments to individuals and corporations named as defendants in this case, and, under the

management services contract, is scheduled to pay EEMC another $1.8 million,

5. Through these acts and others, Options PCS has continued to act contrary to its

nonprofit purposes, and has continued to exceed or abuse the authority conferred upon it by law.

To rededicate Options PCS to its nonprofit purpose of serving at-risk youth, and to recover funds
diverted to its former managers and the corporations they control, the District seeks injunctive
and equitable relief, including, but not limited to,.the appointment of a receiver for Options PCS,
an order halting further payments by Options PSC to any of the Defendants, and the imposition I
of a constructive trust over funds that Options PSC improperly paid to any Defendant.
Jurisdiction

6. The Court has jurisdiction over the subject matter of this case pursuant to D.C.

Ofiicial Code and D.C. Oflicial Code and 29-

412.22. The Court has personal jurisdiction over Defendants pursuant to D.C. Official Code
13-422.

7. The District, a municipal corporation empowered to sue and be sued, is the local
govemment for the territory constituting the permanent seat of the govemment of the United
States. The District brings this action, through its Attorney General, pursuant to D.C. Official
Code

8. Defendant Options Public Charter School ("Options is a District of
Columbia nonprofit corporation organized and to "be operated exclusively for-charitable,
educational, religious and scientific purposes . . . including, more specifically: To establish,
developer, and operate a model Public Charter School for at-risk youth in Washington, D.C. and
to enter into all contracts, leases, or transactions which are in whole or in part related to such
activities." Since on or about August 13, 1996, Options PCS has had a charter agreement with
the District to operate a public charter school.

9. Defendant Dr. Donna D. Montgomery, at all relevant times for this Complaint,
has had her principal place of business in the District of Colmnbia. She has been the Chief
Executive Oflieer of Defendant EES since at least April 17, 2012, she was the incorporator of
EEMC in 2012, and she has served as President and CEO of Defendant EEMC since at least
January 15, 2013. While she was serving in these positions and at the time she incorporated
EEMC, and at all other relevant times, until July 1, 2013, she was also serving as the Executive
Director and/or Chief Executive Officer of Options PCS.

10. Defendant Dr. David Cranford, at all relevant times for this Complaint, has had
his principal place of business in the District of Columbia. He has been the Chief Operating

Officer of Defendant EEMC since at least January 15, 2013. While he was serving" in this

position and at all relevant times, until July 1, 2013, he was also serving as the Clinical Director
and/or Chief Operating Ofiicer of Options PCS.

1. Defendant Paul S. Dalton, at all relevant times for this Complaint, has had his
principal place of business in the District of Columbia. He has been the General Counsel of
Defendant EEMC and a Director of Defendant EES since at least January 15, 2013. While he
was sewing in these positions and at all relevant times, until July 1, 2013, he was also serving as
the General Counsel and/or Provost of -Options PCS.

12. Defendant .C. Hayward, at all relevant times for this Complaint, has had her
principal place of business in the District of Columbia. At. all relevant times, Hayward was the
Chair of the Board of Trustees of She was also the incorporator of Defendant EES
in 2009.

13. Defendant Jeremy L. Williams, at all relevant times for this Complaint, has had
his principal place of business in the District of Columbia. Williams was the chief financial
officer of the District of Columbia Public Charter School Board until August 2013,
when he became the chief financial officer of Defendant EEMC. Without inforrninghis then-
employer PCSB, Williams also accepted a position on the Options PCS Board of Trustees'
Finance Committee in February 2013.

14. Defendant Exceptional Education Management Corporation is a for-
profit Delaware corporation with its principal place of business at 601 13th Street, N.W., Suite
450, Washington, DC 20005. In 2012, Defendant Montgomery was the sole incorporator of
EEMC, and she has owned and controlled the company since then. The company is an
instrumentality of Montgomery and the individual Defendants Cranford and Dalton, who serve

as EEMC's management team.

15. 2 Defendant Exceptional Education Service, Inc. at Options Public Charter School

is a for-profit Delaware corporation with its principal place of business at 601 13th
Street, N.W., Suite 450, Washington, DC 20005. EES was incorporated in 2009 by Defendant
Hayward. The company has been owned and controlled by Defendant Montgomery.

Options PCS Is Established To Operate Public Charter School For At-Risk Students

16. Options PCS operates one of the oldest public charter schools in the District of
Columbia. Since August 13, 1996, it has had a charter from the District to "provide _a high-
quality, unique educational experience for students at-risk of dropping out of school because they
are underachieving, truant, or have behavioral problems." Pursuant to this charter agreement,
Options PCS operates a public charter school. that serves an at-risk student population. Options
PCS has a main campus at 1375 Street, and a secondary campus (Options Academy) at
702 15'" Street,.N.E., both in the District of Columbia.

17. As a public charter school, Options PCS receives public funds from the District in
the form of per-pupil allocations. These District comprise a substantial majority of
Options PCS's revenue ina given school year, with other District and federal funds supplying
most of the remaining revenue. For instance, for SY 2012-2013, Options PCS's published

budget projected total revenue as follows:

Per-Pupil Charter Payments (District funds) $3,631,050
Per-Pupil Facilities Allowance (District funds) $1,008,000
Per-Pupil-Special Education Paylnen-ts $6,972,096
(District funds)

Per-Pupil Summer School Payments (District funds) $114,075
Federal Entitlements $340,000

Other Government (includes District $1,370,182
funds)

Non-Public Funding $27,600
Total Projected Revenue SY 2012-2013 $13,463,003

Interlocking Management of Options PCS and the For-Profits EEMC and EES

18. During substantial periods of 2012-2013, key managers of Options PCS, while
serving as officers or directors of Options PCS, simultaneously served as executive managers of
the two for-profit Defendants, EEMC and EES, that contracted to provide services to Options
PCS.

19. During 2012-2013, Defendant Dr. Donna Montgomery was the Executive
Director of Options PCS. During this same period of time, she also wasthe Chief Executive
Officer of and served on the management team of Defendants EEMC and EES, and was the
incorporator of EEMC.

20. During 2012-2013, Defendant Dr. David Cranford was the Clinical Director fa'
Options PCS. During this same period of time, he was also the Chief Operating Officer of
Defendant EEMC and served on the management team of Defendants EEMC and EES.

21. During 2012-2013, Defendant Paul Dalton was. the General Counsel/Provost of
Options PCS. During this same period of time, he was also the General Counsel of Defendant
EEMC and a Director of Defendant EES.

Pattern Of Self Dealing Between Options PCS And Individual Defendants
22. By early 2012, a pattern of self dealing with, and misuse of, Options PCS by the

individual and corporate Defendants began to emerge.

23. For instance, on or about April 17, 2012, Options PCS made a $159,000 loan to

Defendant EES. Defendant Hayward, who was both the sole incorporator of ES and the chair
of Option PCS's board, signed the loan agreement on behalf of Options PCS. Defendant
Montgomery, who was both the Chief Executive Officer of EES and the Executive Director of
Options PCS, signed the loan agreement on behalf of EES.

24. Additionally, on or about April 17, 2012, Options PCS entered into a "Contract
for Medicaid Billing Services" with EES. Defendant Montgomery executed this contract on
behalf of EES as the company's "Chief Executive Officer." As of that date, Montgomery was
also the Executive Director of Options PCS. This contract provided that will be paid
Twenty-five of all amounts received from DC Medicaid per approved TCN [Transaction
Control Number] . . .

25. Through June 30, 2013, Options PCS paid EES approximately $449,000 for
billing services performed by, or under the direction of, Defendant Dalton and another
individual. During the time period when EES was billing Options PCS for these Medicaid
billing services, both Dalton and the other individual were employed by Options PCS.

Options PCS Enters Into Self-Dealing Transportation Agreement With EES

26. On September 14, 2012, Options PCS and EES entered into a "Transportation
Services Agreement" for 'Non-Public School Bus Transportation Services" for School Year
2012-2013 and beyond. Defendant Hayward, who was both sole incorporator of ES
and the chair of Option PCS's board, signed the agreement on behalf of Options PCS. Defendant
Montgomery, who was then the Executive Director of Options PCS, signed the agreement on

behalf of EES as the company's

27. The "Transportation. Services Agreement" originally provided the following
financial terms:

As compensation for the Services contemplated herein, on a prorated
basis Contractor will be paid as follows:

The total contract price to Options for the SY2012-2013 would be a gross amount

of $450,000.00 with the right to charge an additional $100,000 if daily average

ridership exceeds 15.0 students upon Options approval. The net cost to school will

not exceed $250,000, as balanced against monies received from Medicaid Billing

for transportation services provided.

28. On May 1-7, 2013, Options PCS and EES entered into a "Supplemental
Transportation Agreement." Defendant Montgomery executed this contract on behalf of EES as
the company's As of that date, Montgomery was also the Executive Director of Options
PCS. Defendant Hayward executed this contract on behalf of Options PCS.

29. The "Supplemental Transportation Agreement" increased the base rate of the
original "Transportation Services Agreement" from $450,000 to $750,000 for SY2012-2013.

30. Between September 2012 and June 2013, Options PCS paid EES at least
$981,250 under these Transportation Agreements for transportation services during SY2012-
2013.

31. By comparison, during SY201 1-2012, Options PCS paid its prior transportation
services contractor, Deadwyler Transportation, approximately $70,000 for transportation

services.

Options PCS Projects Large Increase in District Funding In SY2012-2013

32. In a revised intemal budget dated December 14, 2012, Options PCS projected that
in SY2012-2013 it would receive an approximately $2.8 million increase in District public
school funding, an increase of about 25%, as compared to SY2011-2012.

33. The increased Distfict funding in the December 14, 2012 budget was largely
attributable to a projected increase in the allocation of Option PCS's students to a high disability
level in SY2012-2013.

34. The Distn'ct's Public School System pays public charter schools, such as Options
PCS, additional per-pupil allotments based on the disability levels of the students with
disabilities. These additional per-pupil allotments are lowest for students at Level I and highest
for students at Level 4.

35. In its December 14, 2012 revised budget for SY2012-2013, Options PCS
projected that it would receive additional per--pupil allotments, additional District public

school fimding based on the disability levels of the students with disabilities, as follows:

Level 1 $5,292
Level 2 $7,390
Level 3 $14,416

Level 4 $28,284

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36. In its December 14, 2012 revised budget for SY2012-2013, Options PCS I

projected and budgeted for a 42% increase in the number of students at Level 4, from 163
students in SY201 1-2012 to 231 students in

37. As compared to SY2011-2012, the projected 42% increase in the number of
Options PCS students at Level 4 in SY2012-2013 was disproportionately high compared to the
projected 15% increase in the total number of students at Options PCS in SY2012-2013.
According to these projections, 56% of all Options PCS students would be classified as Level 4
in"SY20l2--20l3. This projected increase in Level 4 students in SY201 2-2013 reversed the prior
three-year downward trend in the proportion of Level 4 students at Options PCS. In SY2009-

2010, about 57% of all students were classified as Level 4; in SY 2010-2011, about 53% of all

students were classified as Level 4; and_in_SX_2_QLl_:_2__QJ2, about 45% of all students were
classified as Level 4.

38. Thelevels of students with disabilities are generally determined through an
evaluation process at their schools. Many of the students classified as Level 4 students at
Options PCS in had been classified as Level 1, 2, or 3 students at Options PCS or
another school in SY201 1-2012, while few students classified as Level 4 students at Options
PCS or another school in SY201 1--2012 were classified below Level 4 at Options PCS in
SY2012-2013.

39. The projected 42% increase in the number of Options PCS students at Level 4
accounts for most of the $2.8 million increase in District public school funding that, in December

2012, Options PCS was budgeting far sv 20122013.

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Options PCS Enters Into Self-Dealing Management Agreement With EEMC

40. In early 2013, when three of Options PCS's top executives were acting
simultaneously as the top three executives of EEMC, Options PCS entered into a Management
Agreement with EEMC that provided for Options PCS to pay EEMC at least $2.8 million for
management services in SY 2013-2014.

41. On January 15, 2013, Defendant EEMC submitted a "Technical Proposal
provide School Management and Medicaid Billing" to Options PCS (hereafter, the "Management
Proposal"). The cover letter for this proposal was signed by Defendant Montgomery as
"PresidentlCEO" of EEMC. The Management Proposal identified the EEMC "Management
Team" as including: Defendant Montgomery as "President/CEO," (ii) Defendant Cranford as
and Defendant Dalton as "General Counsel Director of As of the date of
this proposal, each member of the proposal's EEMC management team was employed as an I
officer or director of Options PSC.

I 42. In the Management Proposal, EEMC admitted that "section of
the DC Code [the District's School Reform Act] requires that DC public charter schools utilize a
competitive bidding process for any procurement contract $25,000 or more." The Management
Proposal also admitted that the requirement for a public charter school to "Bid competitively all
contracts" only excludes "management contracts submitted as part of the original charter
application (All other management contracts are subject to bidding requirements)"

43. No proposed management agreement with EEMC was identified in the original or
the renewal charter agreement between Options PCS and the District.

44. In response to the Management Proposal, on February 25, 2013, Options PCS and

EEMC entered into a five-year "Management Agreement," commencing with SY 2013-2014.

The Management Agreement was not the-product of a bonafide competitive
procurement process.

46. Nevertheless, Defendant Hayward, as chair of the Options PCS's board, signed
the Management Agreement on behalf of Options PCS. Defendant Montgomery signed the
Management Agreement on behalf of BEMC, as its "Chief Executive Officer." As of February
25, 2013, Montgomery was also the Executive Director of Options PCS.

47. The Management Agreement obligated Options PCS to pay EEMC a
"Management Fee" of $2,80l,721 for SY2013-2014. A prepayment of $500,000 of the
"Management Fee" was due as of the date of execution of the Management Agreement.

"Subsequent payments equal to twenty five percent of the total fees due EEMC for SY

Management Agreement, Section provision in the Management Agreement deducting
the $500,000 prepayment from Options PSC's final June 15, 2014 quarterly payment was later
crossed out with the approval (and initials) of Defendants Hayward and Montgomery.

48. On February 28, 2013, Options PCS made the $500,000 prepayment under the
Management Agreement for SY 2013-2014 to EEMC.

49. On August 1,2013, Options PCS made a $954,000 payment to EEMC under the
Management Agreement The August 1, 2013 payment included the October 15, 2013 quarterly

payment; however, the October 15, 2013 payment was not due for another two-and-a-half

months. and the early August 1, 2013 payment exceeded the payment due on October 15, 20] 3

by approximately $250,000. Options PCS made the $954,000 payment, on top of the $500,000
prepayment, prior to receiving any documentation of the services that EEMC purportedly

provided to Options PCS.

Options PCS Pays To Rent And Furnish Offices For EEMC And EES

50. During SY2012-2013, the main campus for Options PCS was located at 1375
Street, N.E., Washington, D.C. On January 28, 2013, despite being located in the city's
Northeast quadrant, Options PCS sublet 4,389 square feet of office space in the city's Northwest
quadrant, at 601 13"' Street, N.W., from the Fritts Group, LLC (the "601 13"' Street lease").
Options PCS had no need for office space on 13"' Street, N.W.

51. The 601 13"' Street lease was signed on behalf of Options PCS by Defendant
Cranford, as and by Defendant Montgomery, as

52. Options PCS's purported reason for signing the 601 13"' Street lease was to secure
space for its administrative offices. However, begirming not later than January 15, 201.3, thirteen

days before the signing of the lease, Defendant EEMC was identifying 601 13"' Street N.W. as

its own office address.

53. During SY2012-2013, more than $200,000 of Options PCS's fimds were spent in
connection with the 601 13"' Street lease, including for the following expenses: a security
deposit of $54,000 in or about January 2013, (ii) $13,020_in furniture purchased for the space,
and in rent and other expenses up through August 20-13.

54. Throughout SY2012-2013 and continuing to the present, EEMC and EES have
operated out of the 601 13"' Street lease location, as confirmed by information submitted to the
District by EEMC on May 21, 2013.

55. On July 1, 2013, when the individual Defendants resigned fi'om Options PCS,
Options PCS ceased to have any presence at the 601 13"' Street lease location. From that time
through the present, the 601 13"' Street lease location has been used solely as the corporate

offices of Defendants EEMC and EES.

Options PCS Pays Exorbitant Bonuses To Individual Defendants

56. During Options PCS paid the individual Defendants Montgomery,
Cranford and Dalton substantial bonuses that were unreasonable and inconsistent with the
nonprofit purpose of Options PCS.

57. As of 2013, Options PCS was paying Defendant Montgomery an annual base
salary of about $240,000. In or about March 2013, on top of her base salary, Montgomery
received a ten--year anniversary bonus from Options PCS in the amount of $120,200. The size of
the anniversary bonus -- one-half her annual salary had been approved in mid-2012 by
Defendant Hayward, as chair of Options PCS's board. Montgomery's ten-year anniversary with
Options PCS would not have occurred until about August 18, 2013, by which time Montgomery

had resigned from Options PCS. Options PCS also paid Montgomery a $40,000 holiday bonus

in December 2012, and an additional bonus of $25,000 in or about May 2013. Thus,

Montgomery received bonuses from Options PCS in totaling at least $185,000, on
top of her $240,000 base salary. Her salary and bonuses fiom Options PCS during a one-year
period -- at least $425,000 combined -- totaled more than the salary of the President of the United
States and more than twice the of the Mayor of the District of Columbia, even though
Options PCS is a small school whose revenue comes mostly from public school funding.

58. In or about March 2013, Defendant-Cranford received a ten-year anniversary
bonus from Options PCS in the amount of $83,546. Cranford's ten-year anniversary with
Options PCS would not have occurred until on or about September 1, 2014, by which time
Ctanford had resigned from Options PCS. Options PCS also paid Cranford a $30,000 holiday
bonuses in December 2012, and an additional bonus of $20,000 in or about May 2013. In total,

Cranford received bonuses in totaling at least $133,000 from Options PCS.

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59.

During SY2012-2013, Options PCS paid Defendant Dalton a $30,000 holiday

bonus in December 2012, and an additional bonus of $20,000 in or about May 2013.

60. On July 1, 2013, Defendants Montgomery, Cranford and Dalton resigned from
their positions at Defendant Options PCS. Since thattime, these three individuals have
comprised the management team of EEMC and EES.

Options PCS and EEMC Evade School Board Oversight

61. While still the chief financial_ officer of the District of Columbia Public Charter
School Board which is the District agency that oversees public charter schools,
Defendant Williams became a member of the Options PCS Board of Trustees' Finance
Committee on February 25, 2013, and began acting as a business adviser to EEMC not later than

confidential, intemal PCSB emails

to Defendants Montgomery, Cranford and Dalton, including emails alerting those Defendants to

a surprise inspection of Options PCS plarmed by PCSB staff.

62. Shortly before his employment with PCSB ended and his job as chief financial
ofiicer of EEMC began, Defendant Williams assisted EEMC by surreptitiously inserting its
Management Agreement (with Options" PCS) onto the PCSB's "reviewed contracts" list for its
August 2013 board meeting. By doing so, Williams created the false impression that the
Management Agreement had already been reviewedby the PCBS staff. In fact, the PCBS staff,
other than Williams himself, had not had an opportunity to review the Management Agreement
before it was added to the "reviewed contracts" list. Had it reviewed the Management
Agreement prior to the August 2013 board meeting, the PCSB staffcould have elened the PCSB
to the fact that the Management Agreement raised issues as to possible self-dealing.

63. On or about August 19, 2013, a senior PCSB official learned from Defendant

Dalton that most of Options PCS's management team had resigned from the school and joined
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EEMC. The official inquired into possible violations of conflict-of-interest and disclosure

standards and soon leamed of alleged financial mismanagement and self-dealing at Options PCS.
Within days,_the PCSB arranged for an independent accounting firm to conduct a forensic audit
of Options PCS, and notified the District's Attorney General of alleged misconduct by Options
PCS's management. Since then, the PCSB has authorized the independent accounting firm to
share the results of its preliminary work with the District's Attorney General.
Count I
Exceeding Or Abusing Authority Confer:-ed By Law
(D.C. Code

64. The District repeats and realleges Paragraphs 1 through 63 as if set forth fully in

this Paragraph.

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and is continuing to exceed or abuse, the authority conferred upon it by law, in violation of the
District's nonprofit corporations act.

66. As a result, fimds of Options PCS have been diverted" from the lawfiil purposes of
providing educational and other services for at-risk youth and have been used instead to benefit
and enrich Defendants Montgomery, Cranford, Dalton, EEMC, and E138. A

Count II
Continuing to Act Contrary to Nonprofit Purposes
(D.C. Code-?
A 67. The District repeats and realleges Paragraphs 1 through 63 as if set forth fully in
this Paragraph.
68. Defendant Options PCS, in concert with the Defendants, hascontinued to act

contrary to its nonprofit purposes, in violation of the District's nonprofit corporations act.

69. As a result, funds of Options PCS have been diverted -from the nonprofit purposes

of providing educational and other services for at-risk youth and have been used instead to
benefit and enrich Defendants Montgomery, Cranford, Dalton, EEMC, and EES.
Prayer for Relief

WHEREFORE, the District requests that this Court:

a. Place Defendant Options PCS in receivership;

Freeze the assets of Defendants Montgomery, Cranford, Dalton, EEMC and EES, and
impose a constructive trust over the paid by Options PCS to Defendants EEMC
and EES in 2012-2013 and over the bonuses paid by Options PCS to the individual
Defendants in 2012-2013;

c. Enjoin further payments from Options PCS to the individual Defendants;

Rescind contracts between Defendant Options PCS and the corporate Defendants

EEMC and EES, and enjoin further payments from Options PCS to the Defendants
EEMC and EES.

e. Order such other relief as the Court determines to be just and proper.

Respectfully submitted,

IRVIN B. NATHAN
Attorney General for the District of Columbia

ELLEN A. EFROS
Deputy Attorney General
Public Interest Division


BENNETT RUSHKOFF (Bar #33 5)
Chief, Public Advocacy Section

(202) 727-5173

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Date: October 1, 2013

(Bar #493521)
Assistant Attomey General
Ofiice of the Attorney General
441 Fourth Street, Suite 600-S
Washington, DC 20001

Attorneys for the District of Columbia

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